While the downturn has been bad for some areas of business, one area that has flourished is innovation. Your customers’ needs are changing, and there’s a lot of price pressure in the competitive market, so now is a great time to get out and start developing new services and products.
“Innovation gives you an alternative to the destructive price competition,” says Jim Lane, director of GBQ Redbank Advisors, GBQ Partners LLC. “This is a perfect market to develop something new. Your customers’ needs are changing due to market forces. New products and services you introduce to meet their changing needs face less competition and thus less price pressure. It’s also a good time to introduce new, innovative and less costly products, because people are interested in saving money now.”
Smart Business spoke with Lane about how customer needs can drive innovation and the importance of creating a culture that encourages innovation.
What risks are associated with innovation?
The first is not innovating at all. When your organization doesn’t learn, even if you’re excellent at a single product or service, eventually you will become irrelevant. Your products and services have no purpose but to satisfy your customers, so if your customer base is changing, all products and services will become obsolete. There’s always the risk that somebody else will figure out how to run with a competing product that’s cheaper. You need to be innovating to protect your core customers from competitors.
The other risk is not managing your innovations and over investing in ideas that will fail. About 75 percent of new products fail. You need to spend a little bit of money early to test ideas and be quick to kill the ideas that don’t pass those tests. You will still have the 75 percent failure rate, but the ideas will fail during the early testing stage instead of after you’ve spent lots of money on training, tooling, marketing, etc.
How do you determine your customers’ needs and use them to drive innovation?
You need to listen to them and actually go out and talk to them. Nothing beats talking to the customer. Part of it is traditional listening — listening to complaints during the normal course of business and trying to resolve them. You also need to go out and do customer research, but we’re not talking about thousands of interviews and surveys. Because this decision making is such a professional and formalized process, you won’t need vast samples to figure out what people like and don’t like and what they want.
You need to let them do the talking. Instead of coming up with five survey questions that make sense to you, just ask customers open-ended questions and let them talk. You can check across conversations with other customers and see if there are consistent themes.
